Koizumi Supported In Difficult Mission

A government bureaucrat, Kazushige Nobutani, acknowledged that he might have been signing his own pink slip when he joined the avalanche of Japanese voters who backed Prime Minister Junichiro Koizumi in Sunday's vote. But Nobutani, 39, said he saw no other choice.

"Koizumi wants smaller government in Japan, and I realize my own job may at some point be in danger," said Nobutani, who works for the Economy Ministry. "But Koizumi is a strong leader determined to reform Japan, and the people are behind him. I don't think we have another option. It needs to be done, and Koizumi is the only one who can do it."

An overwhelming number of voters agreed, handing Koizumi and his Liberal Democratic Party their biggest win in almost 20 years in Sunday's election. The party added 84 seats to its majority, winning 296 seats in the 480-seat Diet, the lower house of parliament.

Japanese are worried about how the world's second-largest economy will afford increasing pension costs, health benefits and other programs associated with the country's rapidly growing retirement sector.

The economy, long stagnant, has been on the mend since 2003, but sustaining growth has been a national preoccupation for Japan, which faces competition from the red-hot economy of neighboring China. Reacting to Koizumi's landslide victory, the Nikkei stock index surged to a four-year high Monday. The government also reported that the economy grew by 0.8 percent in the second quarter, far more than had been projected.

Koizumi's mission -- shrinking the government, streamlining bureaucracy and shifting more of the nation's finances from the public to the private sector -- inspired a surprising number of voters.

But the mission will not be easily accomplished, in part because Japan's public sector, statistically speaking, is not as bloated as many believe. On average, there are about 38 public servants per 1,000 people in Japan, compared with about 79 in the United States and about 97 in France, according to the Japanese chapter of the International Labor Organization and government statistics.

Koizumi has already resolved major financial problems in the aftermath of Japan's economic decline in the early 1990s. His banking reform effort, for instance, reduced by more than half the value of bad loans on the books, which stood at $480 billion in 2002.

That leaves Koizumi with fewer obvious targets in his second wave of reforms, beyond his immediate focus -- the massive postal service. Japan Post functions as a bank, insurance company and savings and loan institution, with $3 trillion in deposits, more than Japan's four largest private banks combined. Its 380,000 employees account for more than one-third of the central government's total workforce.

Waste at the agency and frequent use of its coffers for politically motivated public projects became the core target of Koizumi's campaign. He contends that privatization, which he hopes to push through parliament in the weeks after it reconvenes on Sept. 21, would sizably decrease the public payroll, eventually funneling billions of dollars worth of deposits into the private sector.

But even though Koizumi is likely to win approval for privatization, it will be a slow process that will take more than 10 years to phase in. And there is no guarantee that depositors in Japan Post, including many rural retirees who are conservative with their savings, will rush to put their funds into private-sector investments.

"There is a huge cultural issue to overcome; if these account holders were the type of people who played the stock market, they wouldn't have done their banking in a safe haven like the post office to begin with," said Shinichi Ichikawa, an economic strategist with Credit Suisse First Boston in Tokyo. "This may be a step in the right direction, but it will take many years before we feel it."

On Monday, Koizumi identified other projects -- particularly the overhaul of the social security system and the decentralization of the national bureaucracy -- intended to shift more resources and power to local governments.

For most of the post-World War II era, the Liberal Democratic Party, or LDP, governed Japan through political patronage and massive government spending. Under Koizumi's leadership, the party has been transformed.

Many are optimistic about his program. "There is no question that reform isn't easy, and we still don't know what to make of this 'new LDP,' " said Yoshihiko Miyauchi, chairman of Japan's government-appointed Regulatory Reform Committee. "But Koizumi has something big going for him. He has the public's support."

Anthony FaiolaAnthony Faiola is The Washington Post’s South America/Caribbean bureau chief. Since joining the paper in 1994, he has served as bureau chief in Berlin, London, Tokyo, Buenos Aires and New York. He has also covered global economics from Washington. Follow